Regarding the Optimality of Cartel Fines

Cartel and Criminal Conduct Newsletter, ABA Antitrust Section, March 2017

George Mason Law & Economics Research Paper No. 17-14

11 Pages Posted: 30 Mar 2017

See all articles by Bruce H. Kobayashi

Bruce H. Kobayashi

George Mason University - School of Law

Michelle Burtis

Charles River Associates (CRA) International

Date Written: March 27, 2017

Abstract

Economic approaches to determining criminal sanctions focus on harm-based “optimal” penalties. In this note, we examine the extent to which the criminal fines for organizations convicted of price fixing contained in the United States Sentencing Commission Guidelines (USSG) and relied on by the U.S. Department of Justice (“US DOJ”) for criminal price fixing fines are consistent with the economic principles of harm-based “optimal” penalties. We first describe the economic approach to optimal criminal sanctions in price fixing cases and the approach contained in the USSG. We then reconcile the two approaches and illustrate the conditions under which the approaches are consistent. The article uses a simple economic model where the probability of detection is assumed to be one and there are no enforcement costs, and shows the optimal, harm-based penalty coincides with the minimum possible penalty advised by the Sentencing Guidelines. The model then is used to examine the relationship between the probability of detection and the range of penalties prescribed in the Guidelines.

Keywords: Antitrust, Cartels, Law & Economics, Price Fixing

JEL Classification: K14, K20, K21

Suggested Citation

Kobayashi, Bruce H. and Burtis, Michelle, Regarding the Optimality of Cartel Fines (March 27, 2017). Cartel and Criminal Conduct Newsletter, ABA Antitrust Section, March 2017; George Mason Law & Economics Research Paper No. 17-14. Available at SSRN: https://ssrn.com/abstract=2941698

Bruce H. Kobayashi (Contact Author)

George Mason University - School of Law ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8034 (Phone)
703-993-8088 (Fax)

HOME PAGE: http://mason.gmu.edu/~bkobayas

Michelle Burtis

Charles River Associates (CRA) International ( email )

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

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